Sof-T, Inc

question 210

Essay

Sof-T, Inc.manufactures foam products for upholstery companies.It has two workstations, mixing/heating and cutting/assembly.The mixing/heating station is limited by the capacity of the equipment.Cutting/assembly is limited by the speed of the cutting machine workers.Cutting/assembly normally lags behind mixing/heating.Because the demand has increased in recent months, management is considering adding another person to cutting/assembly.This would increase the department's costs by $4,000 a month.If the person is moved from mixing/heating, that department's cost would decline by $3,000.By keeping mixing/heating labourers the same, the department can increase production on-call by 10 percent.Current idle time in mixing/heating averages one-half person a day for a net cost of $1,400 a month.Required:
a.What is the net effect of moving the employee from mixing/heating to cutting/assembly?
b.What is the net effect if a new employee is hired for cutting/assembly?

---

Definitions:

Work in Process Inventory

The value of the goods that are partially completed by a company but not yet ready for sale.

Push Production

A manufacturing process where products are made based on predicted demand and pushed to the market, as opposed to being pulled by actual demand.

Just-In-Time

A production strategy that aims to reduce times within the production system as well as response times from suppliers and to customers by receiving goods only as they are needed in the production process, thereby reducing inventory costs.

Work in Process Inventory

Items that are in the process of being manufactured but are not yet complete, often tracked for cost accounting purposes.